GSEs, HUD Exploring Updated Loan Servicer Compensation Models

The Federal Housing Finance Agency (FHFA) announced Tuesday that it has instructed Fannie Mae and Freddie Mac to study possible alternatives to the current servicing and compensation structure that they employ for their single-family mortgage loans. The initiative will seek to improve service for borrowers, reduce financial risk to servicers, and provide flexibility for guarantors to better manage non-performing loans. The announcement is undoubtedly in response to wide-spread criticism in recent months of what has generally been termed " misaligned incentives " in the compensation structure for servicers. Compensation for servicers has traditionally been based on a small (less than ½ of 1 percent) of the unpaid principal balance of the loan, but the foreclosure crisis has exposed many...(read more)

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Source: http://www.mortgagenewsdaily.com/01182011_servicer_compensation.asp

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